This post first ran September 21, 2008 A mere two weeks ago, the Fannie/Freddie rescue was called “the mother of all bailouts” by some commentators. If the plans of the Administration come to fruition, it will shortly be surpassed by the $700 billion mortgage rescue plan proposed by Hank Paulson late last week. The increase […]
Read more...I hate to take issue with a post by Mike Konczal on some Dodd Frank reform ideas posed by Charles Calomiris in “Beyond Basel and Dodd Frank“, since Mike is usual a source of reliable analysis. But that’s why it’s particularly important to let one of the rare times he goes off beam not to lend credence to reform ideas that are sorely wanting.
The problem in general with Dodd Frank and subsequent fixes is they don’t come close to doing what needed to be done, which is dramatically reduce the ability of financial players to wreck the economy for fun and profit. The fact that the banks howl bitterly over some half-hearted measures should not be mistaken for effectiveness. The big dealer banks have realized that they’ve emerged more powerful and better able to extract rents than before the crisis, so why not press their advantage? Their new position is that any restriction on their profit-seeking is an intrusion and should be beaten back. Witness some recent evidence: their foot-dragging on clearinghouses for swaps. The normally accommodating New York Fed is forming a group to “compel” the banks to live up to their commitments. Of course, with enablers like Timothy Geithner, who has signaled that he is leaning toward exempting foreign exchange derivatives from Dodd Frank implementation, the banks don’t have to fight all that hard.
Let’s turn to the current debate.
Read more...Housing Wire has confirmed what American Banker and the New York Times had indicated was underway, namely, that the formerly joint state/federal effort to deal with foreclosure abuses (still undefined beyond robosigning and improper affidavits) are now separate initiatives. We think that’s a good thing, since the state and federal law issues were so different that it made the idea of a grand global settlement seem a tad deranged, particularly on the fast timetable the Obama crowd was pushing for. As a reader with securities law regulatory experience noted via e-mail:
Read more...Whoever was leading this charge for the Feds totally miscalculated.
LoanSafe reports that the Washington state attorney general, Rob McKenna, has uncovered a likely widespread violation of state law, that foreclosure trustees lack a physical presence as required and a means for borrowers to contact or visit them to submit last minute payments or present documentation. McKenna’s interest appears to result from the fact as with servicers, the foreclosure trustees are not accessible to borrowers and not responsive when there may be legitimate reasons to halt or delay a foreclosure. Note that Washington is a deed of trust state, and the foreclosure trustee handles certain tasks relative to the actual foreclosure. This is a different role than that of the securitization trustee, who is the agent of the securitization trust, the legal entity that holds the loans in the securitization.
Read more...Per Lisa Epstein and April Charney, the ACLU has announced it is contesting the procedures used in Florida’s recently created foreclosure courts:
Read more...Some aggressive spinning on the Fed data releases about its lending during the financial crisis has surfaced at Bloomberg (admittedly with some less favorable facts also included). The Friends of the Fed and other Recipients of Largesse are defending the central banks’ panicked and indiscriminate responses to the crisis. These efforts to rationalize emergency responses fail to acknowledge underlying regulatory failings that remain unaddressed.
The PR push surrounds the foreign bank that got the most support during the post-Lehman phase, namely, Dexia.
Read more...hink I’ve ever seen anything so craven heretofore.
As readers may recall, we weren’t terribly impressed with the so-called mortgage settlement talks. It started out as a 50 state action in the wake of the robosigning scandal, and was problematic from the outset. Some state AGs who were philosophically opposed to the entire exercise joined at the last minute, presumably to undermine it. Not that they needed to expend much effort in that direction, since plenty of Quislings have signed up for the job.
Read more...By William Hogeland, the author of the narrative histories Declaration and The Whiskey Rebellion and a collection of essays, Inventing American History who blogs at http://www.williamhogeland.com. Cross posted from New Deal 2.0
Economic struggles played a huge role in the founding of our country, despite some attempts to revise that history.
Edmund Randolph of Virginia kicked off the meeting we now know as the United States constitutional convention by offering his fellow delegates a key inducement to forming a new U.S. government. America lacked “sufficient checks against the democracy,” Randolph said. A new government would provide those checks.
Read more...Rob Johnson of INET interviews Amar Bhide, an old McKinsey colleague and author of the book A Call for Judgment. From the introduction to this video:
Read more...The Professor of International Business at the Fletcher School of Law and Diplomacy criticizes the tendency in many quarters to rely on mathematical models to inform investment decisions. It’s that overreliance on models that tend to generalize and simplify that helped drive the world into the global financial crash of 2008 and the ensuing Great Recession. Bhidé makes a strong case that human actors need to immerse in the details of individual cases and weigh many different factors to come up with tailored decisions that more closely apply to the complexities of the real world. Bhide also argues that regulators need to take a similarly human-centered approach.
All the banks are fed up with regulation and they’re all going somewhere else.
Read more...I hope NC readers don’t mind my belaboring the issue of the TARP’s phony success, but every time I see the Administration’s propaganda parroted I feel compelled to weigh in.
The trigger was an effort at a balanced assessment by Annie Lowrey at Slate, to which I have some objections, followed by some shameless and misguided cheerleading by Andrew Sullivan:
Read more...But two years ago, I sure didn’t expect the government to make a profit from TARP. And I sure didn’t expect the auto bailouts to become such huge successes.
What’s surprising to me is how pallid is the Obama administration’s spin has been on this. I never hear them bragging about how they managed to pull us out of the economic nose-dive we were facing. I know why: the recession isn’t over, even if TARP was a success, no one wants to hear about it, etc. But it’s one of the strongest and least valued part of Obama’s record – along with the cost control innovations in health insurance reform.
At some point, you have to stand up and defend your record. No doubt Obama is biding his time on this. But count me as surprised as I am impressed.
The level of corruption in our society is so high that it is not only out in the open, but actively enabled by people in very high places. It shouldn’t be any surprise that the famed Turbo Timmie, a man who somehow was forgiven for having neglected to pay payroll taxes while a consultant to the IMF, would not be terribly sensitive as far as ethics rules are concerned. The latest fiascos involve the already-overly-bank-friendly New York Fed.
We’ve commented on some recent revolving door horrorshows.
Read more...I must confess to being puzzled last week by an American Banker article that claimed that Federal banking regulators were looking to send out cease and desist letters to serviers as a way to light a fire under banks who were dragging their feet at the now somewhat infamous so called settlement negotiations among 50 state attorneys general, various Federal regulators, the Department of Justice, and the major banks/servicers.
Now on the surface, this sounds sensible. The banks are not cooperating, so pull out a big gun and if needed, use it on them. But American Banker provided a link to the form of the cease and desist order and it looks remarkably weak. Its requirements are far less demanding than those set forth in the famed 27 page settlement draft that was presented by the AGs and the Federal authorities to the banks.
It’s important to stress that a threat of action that is weaker than what you are demanding in a settlement makes no sense in a negotiating context. It’s like offering to settle a lawsuit for $500,000 when the case only asks for $250,000 in damages. No one would accept the settlement, they’d either fight in court or accept a default judgment.
Read more...Several readers pointed to an article in the Palm Beach Post, “Foreclosure crisis: Fed-up judges crack down disorder in the courts,” about how judges are having to resort to increasingly forceful measures to get foreclosure mill lawyers to comply with court orders. I had refrained from discussing it here because one aspect of the news story struck me as potential misreporting, so I wanted to verify it (and Lisa Epstein pointed to the transcript which enabled me to do so).
There have already been a number of reports of a marked shift in attitudes among judges in the wake of the robosigning scandal. In many courtrooms, the presumption that the bank is right has vanished. For instance, Mark Stopa reported late in March:
Read more...We seem to be going back to the world before the crisis in number of respects. The first is that the Financial Times is again running rings around the Wall Street Journal on markets and financial services industry coverage. The crisis forced the Journal to throw a lot of resources on those beats, with the result that it became pretty competitive.
The second is that the authorities seem to be engaged in a weird form of cognitive dissonance. They clearly can’t pretend the crisis didn’t occur; if nothing else, all the extra new studies and rulemaking imposed by Dodd Frank make that impossible. Yet in every manner imaginable, they behave as if no financial markets near death event took place.
The object lesson of the evening is a story in the Financial Times on a battle between the FDIC, which is responsible for resolution of systemically important firms under Dodd Frank versus the Fed and Treasury. The struggle is over how many non-banks are to put on the systemically important watchlist as required by Dodd Frank. No one wants to be on that roster; it leads to the potential to be subject to all sorts of proctological examinations.
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